Homework Answers
Solution:
Depreciation expenses is excluded in the calculation of Net present value because Depreciation expenses does not involve any cash flow.
Salvage Value is included in the calculation of Net present value because Salvage Value involve cash inflow.
Hence, Option "C" is correct. [Exclude, Include]
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How are the following items used in the calculation of the net present value of a...
Which of the following is true regarding the calculation of net present value? procent value present value of inflow-pr...
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Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine...
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Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine...
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Net Present Value and Other Investment Rules Describe how net present value is used in the...
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Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine...
Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $565,000 and have a useful life of six years. The system yields an incremental after tax income of $165,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $25.000 b. A machine costs $410,000, has a $26,000 salvage value, is expected to last eight years, and will generate an after-tax income of $75,000 per...
Which of the following is true regarding the calculation of net present value? procent value present value of inflow-present vak of outillows et present value-outflows-inflows et present value = inflows-outflons et present value = present value of outflows- present value of inflows Question 8 Acompany has two different investment opportunities, both requiring an initial payment of $150,000. The company's desired rate of return is 10% Project A Year 1 $100,000 Year 2 $100,000 What is the NPV of Project A?...
With the improvement in the technology and understanding of discounting techniques, both the net present value (NPV) technique and internal rate of return (IRR) technique used in capital budgeting analyses have become more popular because these techniques provide decisions that help the firm to a. minimize its overall payback period b.maximize its value c. maximize the initial capital investment d. minimize the number of multiple IRRs computed for every project e.maximize it required rate of return QUESTION 10 Which of...
th and without tax 10-2 Problem 10-17B Applying the net present value approach with and withou considerations d $640,000 for new Ben Baxi, the president of Ben's Moving Services, Inc., is planning to spend 5640 trucks. He expects the trucks to increase the company's cash inflow as follows. Planning for Capital Investments Year 1 Year 2 $165,000 Year 3 $196,000 estment $180,000 Year 4 $240,000 any's policy stipulates that all investments must earn a minimum rate of return of The...
1. Account Rate of return %
2. Payback period in years
3.Net Present Value
4. Net Present Value assuming the cost of capital is 6
percent
Required information [The following information applies to the questions displayed below.] Falcon Crest Aces (FCA), Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows: Initial investment Useful life Salvage value Annual net income generated FCA's cost of...
Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Investment Proposal B С D $(430,000) $(50,000) $(50,000) $(1,820,000) 631,600 70,500 76,800 2,429, 200 $ 201,600 $ 20,500 $ 26,800 $ 609,200 5 years 7 years 6 years 6 years Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. Investment Proposal...
20) Assume a proposed project under consideration by the James River Co. requires $28,900 in fixed assets. The firm plans to ignore bonus depreciation and instead apply straight-line depreciation to zero over the asset's 6-year life. An aftertax salvage value of $5,400 is expected. The project will produce an annual operating cash flow of $7,300 and will require net working capital of $500 initially plus an additional $500 in Year 3. Net working capital will be restored to its original...
Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $670,000 and have a useful life of six years. The system yields an incremental after-tax income of $295,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $22,200. b. A machine costs $570,000, has a $33,800 salvage value, is expected to last eight years, and will generate an after-tax income of $70,000 per year...
Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $550,000 and have a useful life of six years. The system yields an incremental after-tax income of $210,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23,800. b. A machine costs $570,000, has a $37,100 salvage value, is expected to last eight years, and will generate an after-tax income of $72,000 per year...
Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $565,000 and have a useful life of six years. The system yields an incremental after tax income of $165,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $25.000 b. A machine costs $410,000, has a $26,000 salvage value, is expected to last eight years, and will generate an after-tax income of $75,000 per...
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